Duke University Endowment gains 55.9% in the fiscal year

[Bluedog]

Elite universities have been moving in this direction for years and, if the trend continues, they'll get to your proposal in the not-too-distant future. Here are some thoughts:

1. This is a form of taxation on wealth and income...i.e. the more you have and make, the higher the price you pay. If you want higher taxes on wealth and income, then this is one way to do it.
2. As with all taxation, it's important to ask who really pays the tax ("incidence" in economics-speak) and who benefits from the benefits funded by the tax. A lot of kids from rich families go to elite colleges, so they will pay higher tuition fees. Most poor kids do not go to elite colleges, so they will not benefit from cross-subsidies from rich-ivy-kids to not-so-rich-ivy-kids. It will be the small subset of poor kids who go to elite colleges who will benefit.
3. "Poor kids" who go to elite colleges are, in the long-run, not the poorest of the poor. Elite colleges tend to cherry-pick (quite reasonably, I suppose) kids from poor families that a) would have done pretty well anyways and b) almost all graduates from elite colleges are not poor from a life-cycle perspective. Put differently, the beneficiaries of this policy are not poor!
4. There is some legitimate concern that college financial policies negatively affect family savings and income. Elizabeth Warren got asked on the hustings by an irate father who had saved in advance to pay for his kids' college expenses about why his profligate neighbor, whose income had been similar to his but who had not saved, should be rewarded by having his loans forgiven. It's not a crazy question. Relatedly, Marin Feldstein did a study a number of years ago that found (always subject to critique, mind you) that college rules significantly reduced parents' savings. I don't think that problem has gotten any better in the past 30 years.
5. College tuition is pretty much the only service you can purchase in the US where the price you pay is explicitly linked to your income and wealth (outside of things like loans where the cost-of-service is linked to those things).

Just to be clear, I am neither endorsing nor critiquing your proposal.

Right, as you say, certain things that must be financed are OPPOSITIELY correlated with income and wealth. That is, those with lower income/wealth may not be given as good terms (i.e. interest rate) on a loan for good reason (i.e. they are higher risk to not repay). Of course, your point stands that other "goods and services" that are paid in full don't take into consideration your income/wealth. You don't go to a car dealer where they have a "sliding scale" of price based on income of course. Obviously, many believe that education is different. We do somewhat have a "sliding scale" for public elementary education in the form of property taxes (the more expensive house you have, the more you pay towards the local schools).

[Mtn.Devil.91.92.01.10.15]

This may be a controversial take but I hate the idea of cutting tuition. Full tuition at a place like Duke is paid by the wealthy. By having them pay a ton, it allows the school to afford to take middle class kids and give those folks financial aid. Heck, I would be in favor of making tuition $100k per year. Anyone who can afford that would pay it and the rest would fill out their FAFSA forms and get aid to make up the difference between what they can afford and the $100k bill. So, someone who could afford to pay $20k would get $80k of aid and someone who could afford $75k would get $25k of aid.

The moment you take a penny of financial aid, you don't really care how high tuition is at a school like Duke that meets 100% of aid. If FAFSA says I can afford to pay $55k, it does not matter to me whether tuition is $60k or $100k. In either case I am paying $55k. But, if tuition is $100k, then the really rich kids who can afford a bill that large are carrying more of the burden of supporting the school.

I'm sure you all get it, but to put a fine point on it -- right now, the child of a super rich person pays something like $70k per year to Duke. If tuition were $150k per year, which would sound outrageous, Duke would get a higher percentage of tuition from the super rich. Sounds like a good plan to me!

My parents are both Duke grads and proud of their academic achievements. When I was looking at colleges, they encouraged me NOT to apply at Duke (I would have had a pretty decent shot of getting in) because they got sticker shock at the cost. We were probably "lower middle class" at that time and I now know that we would have almost certainly not paid the full price, but the giant number in the brochure scared my parents, and thusly me.

Point being - raising the tuition to infinity would absolutely have some effects you aren't considering.

[WillJ]

My parents are both Duke grads and proud of their academic achievements. When I was looking at colleges, they encouraged me NOT to apply at Duke (I would have had a pretty decent shot of getting in) because they got sticker shock at the cost. We were probably "lower middle class" at that time and I now know that we would have almost certainly not paid the full price, but the giant number in the brochure scared my parents, and thusly me.

Point being - raising the tuition to infinity would absolutely have some effects you aren't considering.

This is a very good point. A lot of prospective first-in-their-family-to-go-to-college kids, and some others, too, know a lot more about the sticker price than they do about their likely net price (i.e., net of institutional aid, pell grants, etc.)

[gep]

I'm sure that to some this is going to sound tone deaf and entitled, but I'll say it anyway. A lot of people think that all Duke alums are as wealthy as David Rubenstein, but in reality, a large portion of Duke's students and alumni are middle to upper middle class families from high cost of living areas. Yes, they have made the choice to live in these areas, but they also should not be penalized for it. Many of these families also choose to be prudent and save money for college, making sacrifices to do so. No, they are not choosing between eating and not eating, but they are forgoing things they could otherwise enjoy. Also, people used to have kids younger so they would have more time after the kids went to college to save up for retirement. As families have kids later, they have more savings by the college years that is considered free game for colleges (not all of it can be stashed in accounts that are not considered in aid formulas) and less time after the kids are in college to save unless they work until they are very old.

The current system penalizes these families as they make too much to qualify for significant aid but not enough to be able to easily write the check and not think about it, particularly as the cost of attendance is growing at a rate faster than wages. The cost of a year at Duke as a percentage of the salary and savings of the typical student has gone up significantly. Yet Duke (and other schools) has no qualms about calling these alums and asking for increased gifts, primarily appealing to loyalty to Alma Mater Dear but also with the implied message that the extra $50 a year might put Junior over the top to get in as a legacy.

The current system is set up to benefit the super rich and those who get a full ride - it is a barbell effect. I have many classmates with kids approaching college age who do well financially by most metrics (and most are in the same financial category that their parents were when they attended) but are not even considering Duke for their kids.

All that being said, the economics major in me says that Duke is a luxury good where demand far exceeds supply, so they should charge what they can. But just don't forget the people who got you there in the meantime.

This is my favorite “too rich to be poor but too poor to be rich”. When my son got into Duke in 1998, we did the FASFA app and it came back that we could afford the full tuition… so no aid. I didn’t really believe it, but we did it anyway. Based on this, I was very disappointed and skeptical of FASFA. When my daughter later got into Tufts (similar tuition as Duke), I didn’t even bother with FASFA… just bit the bullet. No regrets. Sounds like things might have changed a bit over the years…

[LasVegas]

This is my favorite “too rich to be poor but too poor to be rich”. When my son got into Duke in 1998, we did the FASFA app and it came back that we could afford the full tuition… so no aid. I didn’t really believe it, but we did it anyway. Based on this, I was very disappointed and skeptical of FASFA. When my daughter later got into Tufts (similar tuition as Duke), I didn’t even bother with FASFA… just bit the bullet. No regrets. Sounds like things might have changed a bit over the years…

And if you didn’t pay, the student has to take out loans. Not many people out there have parents who can foot the bill. So raising tuitions costs just absolutely kill these students. Big difference in graduating with $40k in loans vs $150k or whatever.

[HereBeforeCoachK]

Coulda used maybe 20 million of the crypto to do this to Wally Wade: https://www.espn.com/college-footbal...irdest-stadium

[budwom]

I got a chuckle out of the Duke statement I received today about the endowment's 56% return. They have a series of vertical bars showing how the endowment has grown over the past 14 years. Seems straightforward, simple bar graph. But wait, the bar for the 56% gain this year is WAY undersized...looks more like a 25% gain...I think the message is We Don't Want You To Think We Don't Want and Need More Money. Humorously out of scale.

[WillJ]

I got a chuckle out of the Duke statement I received today about the endowment's 56% return. They have a series of vertical bars showing how the endowment has grown over the past 14 years. Seems straightforward, simple bar graph. But wait, the bar for the 56% gain this year is WAY undersized...looks more like a 25% gain...I think the message is We Don't Want You To Think We Don't Want and Need More Money. Humorously out of scale.

“Dishonestly” is another adverb you could apply.

[budwom]

“Dishonestly” is another adverb you could apply.

Ha...well, perhaps so, but after a few decades of corporate graph manipulation, this looked like a rather clever one...really not sure why they did that, on one hand they (justifiably) bragged about the return, then clearly downplayed it graphically.

[Bluedog]

Ha...well, perhaps so, but after a few decades of corporate graph manipulation, this looked like a rather clever one...really not sure why they did that, on one hand they (justifiably) bragged about the return, then clearly downplayed it graphically.

Is it a log scale or something? I have seen some long term investment return graphs in log scale before...

[WillJ]

Ha...well, perhaps so, but after a few decades of corporate graph manipulation, this looked like a rather clever one...really not sure why they did that, on one hand they (justifiably) bragged about the return, then clearly downplayed it graphically.

Good point. We are not the worst sinner in the congregation

[Indoor66]

Good point. We are not the worst sinner in the congregation

Isn't that comforting.

[budwom]

Is it a log scale or something? I have seen some long term investment return graphs in log scale before...

No, it's a pretty basic scale, starting at $5.9 billion in 2007, and everything looks proportional until this year's $12.7 billion...